If you walk onto a car dealership lot with no financing plans, no money available for a down payment, and a poor credit history to boot, you are walking into the arms of an octopus. Going onto a lot with your financing secured, is akin to going fishing yourself. You get to throw back what you do not want.
The Down Payment Schtick
Car dealers can run up their profits by exacting a down payment. The bigger the better. This offers them more security should you default on the terms of your loan. And if they are arranging the financing, they can always say they need one to get you approved for financing. Couple that with the belief that only the dealer can help you with financing, and you are suddenly under enough pressure to turn you into an uneasy sucker - just what a dealer loves.
The Credit Questions
Of course, most car sales clerks have been trained to start asking you questions about your credit history and your ability to arrange financing. Understand that the sales clerk is not asking you these questions to see if you qualify as a potential buyer. They are asking these questions to see how much leverage they have for goosing you for a large down payment and interest rates high enough to make a loan shark blush.
The Expectations
It is absolutely true - if you want to buy a car and know you have credit issues, a dealer feels comfortable increasing your interest rate from 8-9% on up to 19-20%. They know you are expecting to pay a higher rate, after all. If a dealer knows your short-comings, you can be sure you will be asked for more money down and given a higher than necessary interest rate.
The Reality
Car dealers stand to make a lot of money with their financing and it is in their best selfish interest to get a hefty down payment and high interest rates. Count yourself out of the dealership game. Instead of financing through the dealer, get pre-approved so you can walk onto the dealership lot confident in what you can afford and not having to put up with all their high-pressure strategies.
The Good News
A plethora of high-quality, online finance companies are set up to specifically accommodate auto purchases and financing services for folks with no cash available for a down payment and poor credit histories. Some of the online websites are actually shopping services that let the word out to lenders that you are looking and can usually have you quotes from a number of financiers eager to lend.
The First Things First
To skip the high-pressure tactics of a dealer, have your financing approved before you walk onto any lot. In your position of power, you will be able to negotiate a good deal. You will already know that the financing is with terms and conditions you can live with.
The Cherry on Top
Auto financing services also have access to high-quality car dealers who are eager to offer you the best deal since they know you already have your financing arranged. As usual, be cautious, but it would not hurt to check these dealers out in hopes of further eliminating hassles and getting yourself into the driving seat as soon as possible. At any rate, have your financing lined up before you do any car shopping.